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Economic Development and the Environment - A Theoretical Model to Explain the Existence of Environmental Kuznets Curves

A number of empirical studies has identified environmental Kuznets curves representing an inverted U-shaped relation between pollution and gross domestic product (GDP) per capita, that is replicated here by an empirical time series of surface water quality data. To analyze the driving forces behind these empirical patterns the paper provides a theoretical model postulating a universal welfare function constant over time and valid for all countries. The country-specific choice of a certain level of environmental quality depends on the shape and position of the national production possibilities frontier in a GDP per capita / environmental quality space. The model allows to discuss the effects of environmental policy, technical progress and population growth as well as the relevance of spatial aspects of pollution. The analysis helps to identify policy options to "tunnel through the Environmental Kuznets Curve" - as for example by innovation enhancing policies or transfer of more efficient technologies from the industrialized to the developing countries. Nevertheless it comes to a pessimistic prognosis with respect to a reduction of greenhouse gas emissions.